KEYSTONE XL

Both sides find hope in new State environmental report -- but situation isn't any clearer for Obama

Elana Schor, E&E reporter

E&ENews PM: Friday, January 31, 2014

This story was updated at 6:40 p.m. EST.

The State Department today gave hope to both sides of the pitched battle over Keystone XL in a report that made few changes to its earlier conclusion -- that rejecting the pipeline would not stop development of the emissions-intensive Canadian oil sands -- while staying mum on the overarching impact of the controversial project's greenhouse gas emissions.

The hotly anticipated final environmental impact statement (EIS) on KXL "presents a considered analysis but does not answer the broader question" of how approving it would affect national and international climate policy, Assistant Secretary of State for Oceans, Environmental and Scientific Affairs Kerri-Ann Jones told reporters today. The Obama administration aims to tackle geopolitical and economic concerns related to the pipeline in the next phase of its review, which Secretary of State John Kerry has no firm timeline for completing.

That lack of a final word on the 1,179-mile pipeline, the delay of which has taxed U.S.-Canadian ties and sparked repeated GOP attempts to force President Obama into granting it a permit, could further inflame supporters who view the minimal amount of changes in the final EIS as a sign that the debate over KXL's merits is over.

"To kick off his 'year of action,' President Obama should use his pen and approve the permit without any further delay," House Energy and Commerce Chairman Fred Upton (R-Mich.) said in a statement on the EIS.

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Although environmentalists saw State largely shrug off their onslaught of attempts to argue that blocking KXL would "lock in" oil sands production due to the higher costs of shipping oil sands by rail, climate activists found something to cheer about in the absence of a headline conclusion on the heft of the pipeline's greenhouse gas emissions.

Pointing to the EIS conclusion that KXL's crude would generate between 1.3 million and 27.4 million more annual tons of carbon emissions than conventional fuel, greens today harked back to Obama's June vow that climate impact would prove "absolutely critical" in his final look at the pipeline (E&E Daily, June 26, 2013). Environmentalists said those extra emissions from the pipeline's potential imported crude, even if every barrel were burned regardless of a KXL approval, give the White House ample room to reject the project.

Pipeline supporters largely cheered the EIS, welcoming its conclusion that Canada would tap the 168-billion-barrel oil sands reserve with or without KXL. But some are concerned that State's lack of a firm deadline for finishing its process could allow Obama and Kerry to layer more delays on the years-long review, perhaps even beyond a November election that will find multiple pro-KXL Democrats -- such as Sens. Mary Landrieu of Louisiana and Mark Pryor of Arkansas -- locked in difficult re-election races.

One senior Republican aide said his party would pay close attention to whether Kerry keeps deliberating beyond the maximum 90 days of interagency consultation, meaning red state Democrats could face mounting pressure on the pipeline once that clock expires.

Top KXL backer Sen. John Hoeven (R-N.D.) today called the EIS "a step forward" that points the way to a presidential approval, but he also warned that "the report is vague and provides no timeline for a final decision, giving the president broad room to postpone a decision further."

Pipeline supporters also are concerned about the EIS's lack of a summary finding on the pipeline's impact, an omission that the GOP aide said leaves room for "a decision to go either way."

If not by pipe ...

At the heart of the EIS's case for approving KXL, which would ship upward of 700,000 barrels per day of heavy crude from the Alberta oil sands, is its conclusion that the forces propelling "oil sands development are more global than any single infrastructural project." Rail, tanker and other modes of transportation stand ready to fill the gap left by denying KXL, in large part if not fully, according to today's report.

Environmentalists looked favorably on a passage in the EIS that predicted -- should domestic oil prices fall below $75 per barrel and pipeline capacity remain limited -- high shipping costs could put a damper on Canada's heavy fuel push. But State noted that such market forces remain unpredictable in the real world and "should not be conflated with the more limited effects of individual pipelines."

In addition, the EIS's analysis of rail as an alternative to pipelines significantly shifted in favor of oil sands shipments since March, when greens slammed a draft version for not fully distinguishing predictions for light Canadian oil by train from predictions for heavier crudes.

An added blow to greens delivered by the rail analysis came when State estimated the carbon footprint of shipping oil sands by pipeline versus other methods. Alternatives to KXL yielded 28 to 42 percent greater annual emissions than the pipeline over its 50-year life span, the government found.

Economics and safety

Job creation remains a central element of Republicans' and industry's arguments for approving KXL, and the EIS continued State's trend of sharing information that both sides could spin to their benefit. The pipeline would support 42,100 jobs during its two-year construction period and add $3.4 billion to the U.S. gross domestic product, according to the EIS.

But in a figure frequently cited by pipeline opponents, State also projects that KXL would support just 50 jobs once it begins operation. That low employment number was cited by Obama himself last year, albeit in an incorrect context, during an interview that riled KXL supporters by portraying the president as unconvinced of the pipeline's value (E&E Daily, July 30, 2013).

On the somewhat less primary but regionally significant question of pipeline safety, the EIS points to unique cleanup challenges in the event of an oil sands crude leak given its heavier chemical nature. That acknowledgment marks a nod to concerns from environmentalists and landowners along the pipeline's route that a KXL spill could overwhelm their communities if the released crude were to sink beneath the surface of a water body -- which occurred in 2010 following an oil sands pipeline leak in Marshall, Mich.

The EIS also includes recommendations for potential added spill prevention methods stemming from an independent risk review commissioned at the behest of U.S. EPA and other safety advocates, performed by the engineering firms Battelle and Exponent. While it delves deeply into possible pipeline risk scenarios, State's overall conclusion is little changed from its March report: that "the predicted frequency of incidents is very low, the probability of a large spill occurring is very low, and, consequently, risk of environmental impacts is minimal."

IG probe goes on

State's release of the EIS before its independent inspector general completed a conflict-of-interest investigation related to the private contractor leading the review surprised some in both pro- and anti-KXL camps (Greenwire, Jan. 31).

But Jones, the assistant secretary of State, today shook off a question about the IG inquiry into environmentalists' bias charges against the contractor, Environmental Resources Management (ERM). "We feel confident that there are no issues related to this contractor," she told reporters.

That explanation is guaranteed not to please environmentalists who have hammered away with charges that State failed to fully vet claims by ERM and TransCanada Corp., KXL's sponsor, that the two companies could work together impartially. A senior ERM analyst working on the EIS previously worked on TransCanada projects, according to documents leaked to the liberal magazine Mother Jones last year.

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